Navigator Holdings Ltd. reported operating revenue of $79.9 million for the three months ended June 30, 2020, compared to $73.6 million for the three months ended June 30, 2019.
A net income of $3.0 million (or an earnings per share of $0.05) for the three months ended June 30, 2020 which includes COVID-19 related foreign exchange gains of $2.5 million and a $0.2 million loss on our 50/50 joint venture (the “Export Terminal Joint Venture”) relating to the ethylene export marine terminal at Morgan’s Point, Texas (the “Marine Export Terminal”), resulting in a net income relating to our vessels of $0.7 million.
This compares to a first quarter 2020 loss of $8.2 million, which comprised of foreign exchange losses of $3.7 million, a $3.0 million loss on the Export Terminal Joint Venture and a balancing loss relating to our vessels of $1.5 million and also to a net loss of $7.7 million (or a loss per share of $0.14) for the three months ended June 30, 2019.
For the quarter, we reported a loss of $0.2 million on our share of the Export Terminal Joint Venture. However, with the commencement of the long term take or pay contracts as of the beginning of June, the terminal generated a profit for the month, although not sufficient to overcome the losses of the prior two months. It is anticipated that the terminal will remain profitable for the remainder of the year.
Adjusted EBITDA(1) was $31.9 million for the for the three months ended June 30, 2020, compared to $23.2 million for the three months ended June 30, 2019.
Fleet utilization improved to 88.3% for the three months ended June 30, 2020 compared to 85.2% for the three months ended June 30, 2019.
Navigator Eclipse, one of our flagship 37,500cbm ethylene carriers, successfully completed a loading of 20,000mts from our Marine Export Terminal in June 2020 – the largest ethylene parcel ever carried on a gas carrier.
A new three year charter agreed for a midsize ethane/ethylene carrier, with another midsize vessel extended until the end of 2021. Both charters are for the transportation of ethane and both are at charter rates of well in excess of $30,000 per day.
On August 4, 2020, amended our Terminal Facility to provide for a total availability of $69.0 million and to enable the immediate drawdown of $34.0 million for general corporate purposes.
We have achieved a record of 622 days without a Lost-Time-Incident (LTI) across our in-house technical managed fleet of 17 vessels, while keeping vessel operating costs under control.
The Company’s financial information for the quarter ended June 30, 2020 included in this press release is preliminary and is subject to change in connection with the completion of the Company’s quarter-end close procedures and further financial review. Actual results may differ from these estimates as a result of the completion of the Company’s quarter-end closing procedures, review adjustments and other developments that may arise between now and the time such financial information for the quarter ended June 30, 2020 is finalized.
Ethylene Marine Export Terminal
The ethylene Marine Export Terminal is fully functional and the 30,000 ton storage tank, which will increase the terminal’s throughput capacity, is scheduled to be completed and in service by the end of this year. The terminal achieved a throughput in excess of 80,000 tons during the month of June 2020. The committed offtake agreements, which have minimum terms of five years, account for approximately 95% of the one million ton annual nameplate throughput capacity.
The Company contributed $7.5 million to the Export Terminal Joint Venture during the second quarter of 2020 with an initial draw down on the Company’s Terminal Facility. In addition, since June 30, 2020 the Company has contributed a further $7.5 million to the Export Terminal Joint Venture, also drawn from the Terminal Facility. To date the Company has contributed $140.5 million of our expected share of the approximate $150.0 million capital cost of the Marine Export Terminal. The remaining contributions are scheduled to be contributed during 2021.
Toward the end of the first quarter of 2020, ethylene shipping slowed as Asian demand was materially impacted by COVID-19 lockdowns and a general slowdown in the global economy. This trend continued into the second quarter. However, as Asian economies restarted during the latter half of the second quarter, so too did the demand for ethylene. An upsurge in U.S. ethylene export capacity from our Marine Export Terminal, drove an uptake in cargo liftings from the second half of May onwards, positively impacting handysize ethylene tonnage. June cargoes alone from the two export terminals in the U.S. totaled around 100,000 tons. July and August also kept pace as the ethylene price arbitrage remained open with charter rates and vessel utilization across the ethylene shipping fleet having improved markedly in the latter part of the second quarter.
Propylene has seen a busy second quarter. Asian pricing improved, increasing pricing arbitrage with the result that approximately 75,000 tons was fixed from the U.S. Gulf area on the spot market. Navigator’s vessels lifted approximately half of these tons. The Middle East also contributed export tons, with three handysize cargoes employed on the spot market, two of which were on Navigator vessels. European petrochemical producers continued to use naphtha as feedstock throughout this period which resulted in excess butadiene availability, due to low regional demand. These volumes were exported to Asia on handysize semi-refrigerated vessels adding ton-miles to the segment.
LPG freight rates were volatile during the quarter with the Very Large Gas Carrier 12 month time charter index falling by 36% from $1.1 million per calendar month (“pcm”) at the beginning of April to $720,000 pcm at the end of June and the Baltic spot index likewise dropping by 44% during this period. The handysize vessel 12 month charter assessment in comparison declined only 5% from $650,000 pcm to $620,000 pcm showing its resilience to volatility and maintaining a stable profile due to the vessels’ flexibility in trading in LPG, petrochemicals and ammonia markets.
The Luna Pool commenced operations in April and had 13 out of the 14 designated handysize ethylene vessels operating in the pool by the end of June. The remaining vessel has since been delivered into the pool. The market participants have welcomed additional ethylene vessels to our service offering. It enables us to improve our flexibility and better meet our customers’ needs especially during the ramp-up of the Marine Export Terminal, when ship availability and logistical scheduling added value to the stakeholders.
In summary, the quarter started slow due to the negative impacts of COVID-19 on the world economy but it gradually recovered as various government restrictions were eased and consumption improved, bringing monthly utilization levels from mid 80% at the end of the first quarter to approximately 90% from May 2020 onwards, in part due to the increased activity through the Marine Export Terminal.
The impact of COVID-19 continues to affect global economic conditions that effect our business, financial condition and the results of our operations. The ultimate severity of COVID-19 is uncertain and its future effects depend on the spread of the outbreak, the reactions of various national governments and the duration of the effects of the virus. Therefore, an estimate of the likely impact cannot be made at this time.
Crew changes continue to be a challenge, consistent with most shipowners, although an increasing number of crew changes have successfully occurred during the quarter, with 380 crew relieved, but still leaving over 130 with overdue leave. Drydocking vessels have resumed in various dockyards around the world and the Company has undertaken three drydocks during the second quarter, with a further eight being scheduled for later in the year.
To increase liquidity, the Company entered into an agreement with the lenders of the Terminal Facility to allow an early true-up of $34.0 million, enabling those funds to be immediately drawn for general corporate purposes due to previous capital contributions for the Marine Export Terminal being paid from the Company’s own resources. In addition, the company is seeking to refinance one of its vessel loans to unlock approximately an additional $30 million for general corporate purposes. This refinancing is expected to be completed during the third quarter.
The Company continues to assess the capital markets for refinancing its existing $100 million senior unsecured bond that matures in February 2021. The Company has engaged financial advisors to investigate opportunities in this regard.
Source: Navigator Holdings Ltd.